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How to: The division of property when a marriage, civil union or de facto relationship ends

Introduction

Married, de facto and civil union couples now subject to the same equal-sharing rules

On 1 February 2002 there were major changes to the laws dealing with the property of married and de facto couples. Since that date, the property of de facto couples (including same-sex couples) who break up has been divided according to the same equal-sharing rules as govern the property of married couples. Those rules are contained in the PROPERTY (RELATIONSHIPS) ACT 1976. Further, in April 2005 civil unions were established as a legally recognised form of relationship, and civil union couples who break up are now treated the same as married couples under the Property (Relationships) Act.

Just as the old equal-sharing rules were limited in the way they applied to marriages of less than three years (marriages of "short duration"), the current laws usually apply only to civil union and de facto couples who have lived together for at least three years.

Before 1 February 2002, married couples and de facto couples were governed by different sets of laws:

  • Married couples were covered by the equal-sharing rules in the MATRIMONIAL PROPERTY ACT 1976. Under those rules, there was a presumption that the family home and chattels and all other property not kept separate during the marriage or relationship would be divided equally between the couple, regardless of who legally owned what property.
  • De facto couples were not covered by the equal-sharing rules that applied to married couples, but instead by the ordinary rules of property ownership. It was therefore presumed that property owned jointly by the couple would be divided equally, and that property that was owned by one partner only would not be divided. However, it was possible in some cases to get a share of property owned by your partner and to which you had no legal title if you could show a trust of some kind in your favour.

How the information on this topic is arranged

Both the current law and the old law that applied before 1 February 2002 are explained below under the following three headings:

  • Dividing the Property of Married, Civil Union and De Facto Couples - The Current Law
  • Dividing Matrimonial Property – The Old Law (until 1 February 2002)
  • Dividing De Facto Property – The Old Law (until 1 February 2002)

The current laws apply only to married and de facto couples who split up on or after 1 February 2002. If your marriage or relationship ended before that date but you now wish to begin court proceedings for the division of your property, you will be governed by the old laws that applied before 1 February 2002.

Dividing the Property of Married, Civil Union and De Facto Couples - The Current Law

Introduction

The property of married, civil union and de facto couples who have lived together for at least three years is divided (if there is a dispute) according to the same equal-sharing rules. De facto couples include same-sex de facto couples.

Before 1 February 2002, the equal-sharing rules applied only to married couples. The changes to the law that brought de facto couples under the same equal-sharing regime as married couples were made by the PROPERTY (RELATIONSHIPS) AMENDMENT ACT 2001, which amended the old MATRIMONIAL PROPERTY ACT 1976, renaming it the "PROPERTY (RELATIONSHIPS) ACT 1976". Civil unions were established as a legally recognised form of relationship on 26 April 2005, and civil union couples who break up are treated the same as married couples under the Property (Relationships) Act (the changes were made by the PROPERTY (RELATIONSHIPS) AMENDMENT ACT 2005). The Property (Relationships) Act now consists of a single set of laws that, with some exceptions, applies in the same way to married, civil union and de facto couples.

The new laws introduced in 2002 also involved some modifications to the equal-sharing rules. For instance, under the old matrimonial-property laws the presumption of equal sharing was stronger for the family home and chattels than it was for a couple's other property. Under the new laws, no such distinction is made. See below, 'Relationship property' - The presumption of equal shares".

The 2002 law changes also extended the equal-sharing rules so that now they apply not just to when a marriage, civil union or de facto relationship ends, but also to when one of the spouses or partners dies: see below, "Dividing property under the Act when one of the couple dies".

When did the new laws come into force?

In general, the new laws came into force on 1 February 2002. In extending the equal-sharing rules to de facto couples, they apply to de facto relationships that began on, before or after that date. They do not apply to de facto relationships that ended before that date. (A de facto relationship ends if the two people cease to live together as a couple.)

Civil unions were brought under the equal-sharing rules on 26 April 2005.

What is a "de facto relationship" under the Property (Relationships) Act?

A de facto relationship means a relationship between a woman and a man, or a woman and a woman, or a man and a man, who:

  • live together as a couple, but are not married to each other, and
  • are both 18 or older

In deciding whether two people live together as a couple, the court considers all the relevant circumstances, including any of the following if they are relevant:

  • the length of the relationship
  • the nature and extent of common residence
  • whether or not the couple have a sexual relationship
  • the degree of dependence or interdependence between the two people, and any arrangements for financial support between them
  • the ownership, use and acquisition of property
  • the degree of mutual commitment to a shared life
  • the care and support of children
  • the performance of household duties
  • the reputation and public aspects of the relationship

No single factor is essential for the two people to be considered as living together as a couple.

A de facto relationship ends if the two people cease to live together as a couple.

How long must we have lived together to be covered by the equal-sharing rules?

The equal-sharing rules apply to your marriage, civil union or de facto relationship only if you have lived together for at least three years.

A marriage, civil union or de facto relationship of less than three years is called a "relationship of short duration", and in general is not covered by the equal-sharing rules. See below, Marriages, civil unions and de facto relationships of `short duration' (less than three years)".

What if a married or civil union couple were in a de facto relationship immediately before?

In that case the length of the de facto relationship is counted in determining whether or not the marriage or civil union is of "short duration".

For example, if a couple have been married for two years but also lived together as a de facto couple for two years immediately before that, the couple is treated as having been married for four years.

"Relationship property" – The presumption of equal shares

The PROPERTY (RELATIONSHIPS) ACT 1976 classifies property under two headings: "relationship property" and "separate property".

Relationship property is divided equally, unless there are extraordinary circumstances that make equal sharing "repugnant to justice", in which case the relationship property is divided according to the contributions that each party made to the relationship.

In the assessing of the different contributions, financial contributions do not rate any more highly than contributions of other kinds, such as caring for children or performing domestic tasks.

"Relationship property" is equivalent to "matrimonial property" under the old laws (pre-1 February 2002). But as well as extending the equal-sharing rules to de facto couples, the laws in force since 2002 also change the way in which relationship / matrimonial property is dealt with:

  • The old laws distinguished between two types of matrimonial property: on the one hand, the family home and chattels, and on the other, other matrimonial property (or "balance" matrimonial property), such as family businesses, investments, and insurance policies. The presumption of equal sharing for the family home and chattels was stronger than for other matrimonial property.
  • But under the current laws there is just one rule for all relationship property – it is all divided equally unless there are extraordinary circumstances that make equal sharing repugnant to justice.

Separate property remains separate

In general, separate property (that is, all property not classed as relationship property) remains the property of the person who owns it and is not divided. It includes -

  • property that the parties owned before the marriage, civil union or relationship began and that they kept separate during it
  • any gifts and inheritances that the parties received during the marriage, civil union or relationship and that they kept separate

Separate property also includes all property acquired out of separate property, and the proceeds of selling any separate property.

But if an increase in the value of one party's separate property, or any income or gains derived from the property, is caused wholly or partly by the "application" of relationship property, then the increase, or the income or gains, is relationship property, not separate property.

Similarly, if an increase in the value of one party's separate property, or any income or gains derived from the property, is caused wholly or party by the actions of the other party, the increase, or the income or gains, is treated as relationship property, and is divided according to each party's contributions to the increase. This applies whether the other party's actions caused the increase directly or indirectly.

Marriages, civil unions and relationships of "short duration" (less than three years)

The equal-sharing rules apply to your marriage, civil union or de facto relationship only if you lived together for at least three years. A marriage, civil union or de facto relationship of less than three years is called a "relationship of short duration".

In the case of marriages or civil unions of short duration, special rules apply to decide how the property is divided, which mean that instead of there simply being equal shares, the property is divided according to the contributions the parties made to the marriage or civil union. In the case of de facto relationships of short duration, the Act doesn't apply at all (unless there are special circumstances, such as there being a child), which means that your legal rights will be determined by the ordinary rules of property ownership.

The court can decide to treat a marriage, civil union or de facto relationship of three years or more as if it were a relationship of short duration, if the court thinks this is just in all the circumstances.

Marriages and civil unions of short duration - In the case of a marriage or civil union of less than three years, equal sharing does not apply to -

  • the family home or a particular family chattel if it was owned wholly or substantially by one spouse or partner at the start of the marriage or civil union, or
  • the family home or a particular family chattel if it came to one spouse or partner, after the marriage or civil union began, by succession, by survivorship, as the beneficiary under a trust, or by gift from a third person, or
  • the family home and all the family chattels if the contribution of one spouse or partner to the marriage or civil union was clearly disproportionately greater than that of the other

In these cases, the share of each spouse or partner in the property in question is determined according to their contributions to the marriage or civil union.

In the case of relationship property other than the family home and chattels, each spouse or partner is entitled to share equally in the property unless his or her contribution to the marriage or civil union has been clearly greater than that of the other, in which case the shares are determined according to their contributions to the marriage or civil union.

De facto relationships of short duration – In the case of a de facto relationship of less than three years, the courts have no jurisdiction to divide property under the Act, and therefore you are covered by the rules that applied to de facto partners before 1 February 2002. This means that, in general, you are entitled only to property that you have legal title to: for example, if a house is owned jointly, you are entitled to a half-share. See below, "Dividing De Facto Property – The Old Law, as It Applied before 1 February 2002".

However, there is an exception to this, which applies when the court is satisfied

  • either that
    • there is a child of the relationship, or
    • the partner applying for division under the Act made a substantial contribution to the de facto relationship, and
  • that it would create serious injustice if the court didn't make an order under the Act

When this exception applies, the share of each de facto partner in the relationship property is determined according to each partner's contribution to the relationship.

What orders can the court make in dividing the property?

The court can make various orders in relation to the property or to a specific item of property to give effect to the division, such as ordering property to be sold or, in the case of the home, ordering that one party has the right to occupy the property. The court considers the interests of any dependent children.

In determining the amount and value of the property the court takes into account any outstanding debts.

Lump-sum payments to off-set future differences in income and living standards

The court may award a lump-sum payment to one party, or order a transfer of relationship or separate property, if the income and living standards of one party are likely to be significantly higher after the relationship ends than those of the other party, because of the effects of the division of functions within the marriage, civil union or de facto relationship.

This power is aimed at redressing the economic disadvantages faced by a partner who has not pursued a career while the other partner has – for example, if one partner supports the other through tertiary study or looks after the children.

Agreements to divide relationship property

If you've entered into a valid property agreement, the relationship property will be divided according to the terms of that agreement and not by the PROPERTY (RELATIONSHIPS) ACT 1976 (this is referred to as "contracting out" of the Act). However, the agreement must be made according to strict requirements (including each party receiving independent legal advice), otherwise the agreement is invalid: see How to enter into your own property agreement.

If you can't agree between you on how to divide the property, you can apply to the Family Court or High Court to deal with the question under the provisions of the Act.

Dividing property under the Act when one of the couple dies

The new laws that came into effect in 2002 extended the equal-sharing rules so that they now apply not only when a marriage, civil union or de facto relationship breaks up, but also when one of the couple dies.

In that case, the surviving spouse or partner has the choice of either

  • having the relationship property divided under the rules in the PROPERTY (RELATIONSHIPS) ACT 1976, or
  • receiving whatever that spouse or partner is entitled to under the deceased's will or, if there is no will, under the statutory "rules of intestacy"

See How to contest a will and How to deal with a relative dying without a will.

Time limits for applying for property to be divided under the Property (Relationships) Act

If you have split up from your spouse or partner, you must apply to the Family Court within

  • 12 months after your marriage or civil union is dissolved, or
  • three years after your de facto relationship has ended

The Court can decide to extend the time limit, even if the time limit has already passed.

If your spouse or partner has died, and you choose to apply under the Act for relationship property to be divided, the relevant time limits depend on the size of your spouse's or partner's estate:

  • If it is a small estate that doesn't require a grant of administration from the High Court, you must complete a formal notice recording your choice within six months after the death of your spouse or partner, and apply to the Family Court within 12 months after their death.
  • If it is a larger estate requiring a grant of administration from the High Court, you must complete a formal notice recording your choice within six months after the date of the grant of administration, and then apply to the Family Court within 12 months after the date of the grant of administration.

Again, the Court can decide to extend these time limits, even if the relevant time limit has already passed.

Other law changes made in 2002

The changes that were made to the PROPERTY (RELATIONSHIPS) ACT 1976 in 2002 were accompanied by other changes giving de facto partners many of the same rights as people who are legally married:

  • Family protection claims – De facto partners can now apply to the court under the FAMILY PROTECTION ACT 1955 if they think that their deceased partner has not properly provided for them. See How to contest a will.
  • The "rules of intestacy" (when a person dies without a will) – The laws determining how a person's property is distributed if they die without leaving a will (called the "rules of intestacy") were amended so that a de facto partner has the same status as a legal spouse. For those rules, see How to deal with a relative dying without a will.
  • Spousal maintenance – The provisions in the FAMILY PROCEEDINGS ACT 1980 allowing for the court to award spousal maintenance to a spouse or ex-spouse now apply also to de facto couples. See How to apply for spousal or de facto maintenance.

Dividing Matrimonial Property – The Old Law (until 1 February 2002)

Introduction

Before 1 February 2002, the division of property of legally married couples was governed by the MATRIMONIAL PROPERTY ACT 1976 (changed in 2002 to be called the PROPERTY (RELATIONSHIPS) ACT 1976). There was a presumption that the family home and chattels and all other property not kept separate during the marriage would be divided equally between the parties. Before 1 February 2002, the Act did not apply to de facto couples.

Matrimonial property – The presumption of equal shares

The Act classified property under two headings – matrimonial and separate – and provided that matrimonial property would, in general, be divided equally. The Act divided matrimonial property, in turn, into two categories:

  • The family home and chattels (including the family car and furniture) – This was divided equally unless:
    • the marriage was for less than three years (a "marriage of short duration"), or
    • there were extraordinary circumstances that would have made equal sharing repugnant to justice,

in which case the home and chattels were divided according to the parties' contributions to the marriage partnership.

  • Other matrimonial property (property such as family businesses, investments, and insurance policies, including superannuation) – This was divided equally unless the parties' contributions to the marriage partnership were clearly unequal, in which case it was divided according to the parties' contributions to the marriage partnership. (This was sometimes called "balance" matrimonial property.)

Therefore the presumption that the property should be split 50-50 was stronger for the family home and chattels than it was for other matrimonial property.

In the assessment of the different contributions made to the marriage, financial contributions did not rate any more highly than contributions of other kinds, such as caring for children or performing domestic tasks.

Separate property remained separate

In general, separate property (that is, all property not classed as matrimonial property) remained the property of the person who owned it and was not divided. It included:

  • property that the parties owned before they married and that they kept separate during the marriage
  • any gifts and inheritances that the parties received during the marriage and that they kept separate

Separate property also included all property acquired out of separate property, and the proceeds of selling any separate property.

But if an increase in the value of one party's separate property, or any income or gains derived from the property, was caused wholly or partly by the "application" of matrimonial property, then the increase, or the income or gains, was matrimonial property, not separate property.

Similarly, if an increase in the value of one party's separate property, or any income or gains derived from the property, was caused wholly or party by the actions of the other party, the increase, or the income or gains, was treated as matrimonial property.

Marriages of "short duration" (less than three years)

In the case of a marriage of less than three years, equal sharing did not apply to

  • the family home or a particular family chattel if it was owned wholly or substantially by one spouse at the date of the marriage, or
  • the family home or a particular family chattel if it came to one spouse, after the marriage began, by succession, by survivorship, as the beneficiary under a trust, or by gift from a third person, or
  • the family home and all the family chattels if the contribution of one spouse to the marriage was clearly disproportionately greater than that of the other

In these cases, each spouse's share in the property in question was determined according to the contribution that each spouse made to the marriage.

In the case of matrimonial property other than the family home and chattels, each spouse was entitled to share equally in the property unless his or her contribution to the marriage had clearly been greater than that of the other spouse, in which case the shares were determined according to each spouse's contribution to the marriage.

What orders could the court make in dividing the property?

In giving effect to the division of the property, the court could make various orders in relation to the property generally or to a specific item of property, such as ordering property to be sold or, in the case of the home, ordering that one party has the right to occupy it.

The court considered the interests of any dependent children.

In determining the amount and value of the property the court took into account any outstanding debts.

Making your own agreement to divide matrimonial property

If you had entered into a valid matrimonial property agreement, matrimonial property was divided according to that agreement rather than the Act. This is called "contracting out" of the Act. However, in making the agreement you were required to follow strict requirements (including each party receiving independent legal advice), otherwise the agreement was invalid: see How to enter into a property agreement.

If you could not agree between you on how to divide the property, you could apply to the Family Court or High Court to deal with the question under the provisions of the Act.

Dividing De Facto Property – The Old Law (until 1 February 2002)

De facto couples not covered by the Matrimonial Property Act

Before February 2002 there had long been a common but false perception that de facto couples were governed by the equal-sharing rules in the MATRIMONIAL PROPERTY ACT 1976. Many people thought that, when a de facto relationship ended, property such as the home, car and furniture was divided equally, just as if the couple had been married.

Before February 2002, this was not the case – the division of de facto property was governed by the ordinary rules of property ownership. This meant that if a property dispute between ex-partners went to court, the court would generally divide the property according to who had legal title to what property. But it was possible in some cases to get a share of property owned by your partner if you could show that the property was subject to a trust of some kind in your favour.

Knowing what factors the court would take into account could help the parties settle the question of dividing the property between themselves, rather than going to court. But because of the lack of legislation in this area there was some uncertainty.

(However, since 1 February 2002, de facto couples are covered by the same equal-sharing rules as married couples. That is, they are covered if their relationships ends after that date. See above, "Dividing the Property of Married, Civil Union and De Facto Couples - The Current Law".)

What were the rules determining how de facto property was divided?

In the case of property that you and your ex-partner owned jointly, the court would presume that this should be divided equally. Correspondingly, it would presume that property that was owned by one partner only should not be divided.

However, even if you didn't have legal title to an item of property (for example, if the house or car was in your partner's name only), you could still establish a right to a share in it if you showed:

  • that this is what you and your partner intended (this is called an "express trust", or an "implied trust" if it was not explicitly stated), or
  • that there was a "constructive trust" in your favour, which would exist if
    • you made contributions (financial or otherwise) to the property, and
    • you had a reasonable expectation that you would have an interest in the property, and
    • your partner should have reasonably expected to have to give up some interest in the property

In the same way, if property was owned jointly you could still establish a right to a share in it by showing, on the basis of one of the above grounds, that the property should not be divided equally, but that you should get a greater share than your ex-partner.

Property agreements

Under the old law (pre-February 2002), it was advisable in many cases for de facto partners to enter into a property agreement during the relationship, setting out who would get what should the relationship end.

Since February 2002, de facto couples have automatically been covered by the PROPERTY (RELATIONSHIPS) ACT 1976 (which is the renamed MATRIMONIAL PROPERTY ACT 1976). De facto couples who now wish to enter into their own agreements so as not to be covered by the Act should be aware that, from 1 August 2001, it has been necessary for them to follow special procedures (including each party receiving independent legal advice) in order for the agreement to be valid, in addition to the requirements of ordinary contract law. Until 1 August 2001, no special procedures were necessary. For this area of the law, see How to enter into a property agreement.

Cautionary notes
  • Before a couple makes any agreement for the division of their property should they break up, each party must receive independent legal advice, otherwise the agreement is not valid.
  • Difficulties can occur when classifying property as either relationship or separate property, especially when -
    • it was inherited by one spouse or partner and has since been intermingled with relationship property, or
    • it was acquired in contemplation of a marriage, civil union or de facto relationship, or after a couple separated, or
    • it concerns insurance policies or superannuation funds


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